10.1 The public sector body and private sector participant must decide how the JV is to be managed. The JV should have sufficient freedom to carry out its activities on a day-to-day basis without direct involvement of any participant so that it can achieve its agreed objectives (see also Chapter 3).
10.2 The JV must, however, be accountable to the participants and certain issues will require the participants' approval. These are often known as "reserved matters" or "veto rights". These would typically include:
● approval of business plans, budgets, material contracts and any material deviation by the JV from those documents;
● changes in the distribution policy;
● introduction of new funding, whether in the form of equity or debt;
● introduction of a new participant;
● veto rights regarding the appointment of key personnel;
● changes to the underlying constitutional documents; and
● termination or sale of a material part of the business or assets of the JV.
10.3 The structure of the JV will influence how it is to be managed. For example, a 50:50 JV is often deliberately structured so that both parties have equal representation on the board and equal voting rights. This structure has inbuilt potential for deadlock where no decision can be made if each party takes an opposing view. Where the participants hold unequal shares, a majority shareholder will usually expect to have a final say on matters to be decided at the board and may have greater reserved decision making-rights, whilst a minority shareholder will have more limited rights as appropriate in order to protect its position (see Chapters 3 and 8). However, it is not axiomatic that the split of economic interest represented by ownership of shares or rights to receive profits matches the split of voting rights or control over certain decisions, as the parties may, for good business reasons, wish to agree an asymmetric arrangement.
10.4 Example 8 below provided an example of a more complex two-tier JV structure set up to manage multiple public sector body interests in a JV with a private sector participant.
Example 9: Harwell Science and Innovation Campus JV The UKAEA and the STFC entered into a partnership with Goodman International, a property development and management company, on 13 August 2008. The partnership was intended to develop and manage property and infrastructure on the Harwell Science and Innovation Campus in Oxfordshire and thereby build value, indirectly assist in improving the impact of public investment in science, support science and innovation, and champion the Campus internationally. The JV was structured as an English Limited Partnership with the public and private sector each holding 50% of the equity, initially through the injection, respectively, of land and cash of an equal value. The Partnership is managed by a General Partner company, the Board of which comprises four Directors, two nominated by the public sector body and two by the private partner. Control is thus also 50:50 – decisions have to be made on a unanimous basis. The Partnership has been set up for an initial term of 20 years and is classified in the private sector. Following the initial equity transfers, further land (and matching cash) will be drawn down from the partners progressively as the Campus develops although the Partnership assumed responsibility for managing Campus land from the outset The public sector body interest in the Partnership is held by a separate Limited Partnership between UKAEA and STFC. This helps maintain a unified and integrated public sector objective for the JV and, inter alia, enables the composition of public sector interests to be changed without affecting the structure of the main Partnership. Source: UKAEA |